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Saudi Arabia invests in renewable energy

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Saudi Arabia invests in renewable energy

By RP Siegel

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A number of the large changes that have swept the energy markets in recent years have come from countries like the U.S. wanting to depend less on oil imports…

This led to a massive buildup of domestic oil and gas production which has significantly shifted the landscape. Now we have another major oil and gas producer, Saudi Arabia vowing to depend less on oil exports.
In the Saudi Vision 2030 statement, its stated goals include a vibrant society, a thriving economy and an ambitious nation. A pillar of the thriving economy is to diversify, moving away from the heavy dependence on an oil sector which is expected to decline in the years ahead, to other areas of manufacturing with a heavy emphasis on the development and deployment of renewable technologies and manufacturing capability.

The shift to renewables

Indeed, Saudi Arabia is a country not only rich in oil, but also rich in renewable resources. Besides the tremendous amount of sunshine they receive, among the highest solar irradiances in the world, the wind potential along the Red Sea coast is considerable, rated between 5-7.5 m/s. There are geothermal resources as well.
Recognizing this, Saudi Arabia has set ambitious targets for renewable power, calling for 3.4 GW of installed capacity by 2020 and 9.5 GWby 2023, spending somewhere between $30 and $50 billion along the way. That level of generation capacity is equivalent to roughly 10 percent of the country’s power. An analysis by the International Renewable Energy Agency (IRENA) shows that this would indeed be beneficial to all of the six countries of the Gulf Cooperation Council region (Saudi Arabia, Kuwait, UAE, Oman, Bahrain, and Qatar) since it would reduce water withdrawal by 11 trillion liters (or 16 percent) and save 400 billion barrels of oil in the power sector, while also creating 2000 direct jobs and reducing the region’s per capita carbon footprint by 8 percent by 2030.
But according to Zoheir Hamedi, Middle East and North Africa Program Officer at IRENA, reducing carbon footprint is not necessarily the primary motivation behind this strategic initiative, nor is diversifying the economy. “The main priority is economic, and it’s mainly related to their capacity to export oil and gas to the international market.”
Hamedi went on to explain that the growth in domestic consumption was cutting into the amount available for export. Saudi Arabia produces roughly 10 million barrels of oil per day about 2.5 million of which are used domestically, much of it for electric power generation. Typically, electric consumption increases by 8 percent. That means that even if Saudi Arabia increases its oil production by 2 percent per year, domestic consumption will double by 2035 to 5 million barrels per day.
In short, by switching from oil-fired electricity to renewables, the nation maintains its energy independence, while improving its export potential and reducing emissions at the same time.
In order to achieve these targets, the government is taking aggressive action. For starters a tender process was initiated by the newly formed Renewable Energy Project Development Office, for a 300 MW Skaka solar plant is in the northern Al Jouf province as well as a 400 MW wind farm. The solar contract was awarded to a Saudi company ACWA Power which will provide the power at an impressive 2.3417 cents/kWh. The plant will span 6 square km, with an investment value of $302 million.

ACWA has renewable facilities in 10 countries with generation capacity totaling 22 GW. They also produce 2.7 million cubic meters per day of desalinated water.
An even lower offer was apparently put forward by Masdar and EDF Energies Nouvelles, of 1.79 cents/kWh, but it was rejected. Hamedi pointed to speculation that this bid may have been rejected because it failed to meet the specification of being “proven technology” since it relied on the use of bi-facial solar panels, which collect light from front and back, but have not yet been widely deployed.
Another stipulation of the renewable rollout is that 30 percent of the equipment must be domestically produced in Saudi Arabi. That number will be increased to 60 percent in 2019. The requirement, which could deter some bidders, is consistent with the 2030 Vision and the intention to diversify the energy economy. This should be no problem for Saudi-based ACWA.
For the wind portion, while there are no wind turbine manufacturers presently in Saudi Arabia, a substantial portion of the overall project, including the towers and cabling, as well as the engineering, procurement and construction portions of the project can be met with local resources, which should be sufficient. For specialized components such as turbine blades and gearboxes, there will likely be partnerships with multi-national companies, at least in the near-term.
Additional actions include plans for a 2400 MW wind farm in the north.

What about the tariffs?

On the policy front, framework is being established for net metering for installations below 2 MW, aimed at residential and commercial installations, to be implemented by July 2018. Additionally, tariffs on oil-based electricity have been increased three-fold since 2014, encouraging customers to consider alternatives and improving the business case for renewables.
When asked what more might they do, Hamedi said that they have not yet instituted feed-in tariffs, which would be helpful. Other actions might include doing more to raise awareness of the value and benefit to be gained by switching to renewable energy sources.
In 2014, Saudi Arabia was ranked 9th highest in per capita carbon emissions (U.S. was 14th) . Last year the Saudi Electricity Co. (SEC) and the Petroleum, Chemicals and Mining Co. (PCMC), signed an agreement aimed at reducing emissions, consistent with Saudi Vision 2030. Emissions reduction actions taken by SEC in 2016 led to a savings of 24.8 million barrels of equivalent fuel and 13 million barrels of diesel for the year. One of the strategic objectives of Vision 2030 is to “activate the environmental dimension as a pillar of sustainable development.” Specifically, they have set a goal of improving their Environmental Performance Index ranking from 95th to 50th.
It seems clear that these substantial investments by the Saudi government should pay significant dividends, not only economically, but also in terms of quality of life for the Saudi people.

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